The Denver Marijuana Industry

On November 6, 2012, Colorado passed an amendment to its state constitution, Amendment 64, that effectively legalized pot in the state. Governor John Hickenlooper signed it into law a month later, and the year 2013 was spent laying the groundwork and creating the legal infrastructure to launch the new recreational marijuana industry.

The
first stores in Denver to sell legal pot for recreational use officially opened
– with great fanfare and international media attention – on New Year’s Day,
2014. Now, for the first time, the impact of this bold and radical legislative
change can be reviewed by examining data pertaining to an entire fiscal year.

Local Denver Regulation of Pot

Denver
now issues licenses for retail marijuana stores,
product manufacturing facilities, and cultivation and testing facilities – in addition
to similar licenses for the medical marijuana industry. Incidentally, a retail
marijuana store in Denver may not sell or give away anything that is not an
actual marijuana product, so pot shops are prohibited from selling such things
as cigarettes, alcohol beverages, or even nonalcoholic foods and drinks. That
is in contrast, for example, to how it is done in Amsterdam, Holland, where pot
shops also sell such things as orange juice, coffee, and tea.

Legal residents of Denver who are at least 21 years of age can buy
and possess as much as an ounce of pot, whereas non-residents are restricted to
just a quarter of an ounce. If you live in Denver you can grown as many as six
marijuana plants at home, too, but only three of those can be in the flowering
stage where TCH-infused buds are ready for harvesting. The plants also have to
be in an enclosed and locked space, regardless of whether they are cultivated
indoors or outside.

While it is perfectly legal to grow your own pot, however, you cannot sell your homegrown pot. To sell marijuana you have to have the appropriate license, agree to government inspections, and follow a number of other laws and industry regulations. Applications are made – and rules are enforced – through agencies such as the Denver Business Licensing Center and the Denver Health Department’s inspection division. All marijuana-infused food operations, for example, must have a specific Denver MIP (Marijuana Infused Products) license.

Reducing the Unemployment Rate

While
the issue of marijuana legalization remains controversial, the fact that
Denver’s economy has benefited from it is undeniable. Within the first year of
legalization, more than 16,000 occupational licenses were issued for jobs
directly related to the pot industry, a particularly significant statistic as
the United States struggled to overcome high unemployment.

Meanwhile,
the U.S. Bureau of Labor Statistics reported that Denver’s unemployment rate
plummeted from 10.8 percent in 2010 and 9.3 percent in 2012 to only 3.9 percent
in October of 2014. That was a shrinkage of nearly seven percent in less than
four years. By contrast, the national jobless rate during that same timeframe
fell from 9.8 percent to 5.8 percent – a drop of only four percentage points.
Denver’s economy, in other words, appears to be doing at least 30 percent
better than nation as a whole now that marijuana is leading the way to fuel its
economic rebound.

Greening the Denver Economy

In
total, the state of Colorado has registered approximately $247,000,000 in
recreational pot sales – in addition to sales of medical marijuana that added
another $327,000,000. So within the first year Colorado took in about $575,
000, 000 in sales of weed.

A
survey of marijuana outlets in Denver revealed that each of these businesses
typically serves between 100 and 300 customers per day, ringing up sales that
average $75 per transaction. Business Insider Magazine rated Colorado the fastest
growing economy in the nation, and Denver was also named “a top real
estate market to watch” as the bright economic outlook became a magnet for
permanent migration from other states.

A Tax Revenue Windfall

Colorado
tax, licensing, and fee revenues from the marijuana industry brought in more
than $60 million last year. Significantly, Denver County itself accounted for
over 50 percent of all medicinal and recreational marijuana related sales tax
revenue.

One
marijuana company based in Denver was studied by researchers within the
business school at the University of Denver. The local CBS television news
outlet subsequently reported that the stores owned and operated by that one
business were forecast to generate annual sales of more than $11 million and
about $1.5 million in state and local taxes. That is about 800 percent more tax
revenues than comparable businesses in other industries generate.

Marijuana Industry Jobs

That
same University of Colorado business school study revealed that the marijuana
company it researched created almost 300 direct or indirect employment
opportunities in areas such as working in the retail locations or in secondary
roles such as packaging, accounting, and security. The companies workers also
enjoy an average hourly wage of $17 plus benefits like having half of their
health care paid for and receiving regular paid vacations.

The total impact from that one company was estimated to be around $30 million. But similar stories can be heard all over Denver. The types of direct job opportunities available in the industry include so-called “budtenders,” which are the marijuana shop equivalent of baristas or bartenders, managers, plant growers, and plant trimmers. Many of these in-store workers start off at salaries in excess of $10 an hour, and within the first year of employment lots of them received promotions and saw their salaries rise by 50-100 percent.

According
to data published by the Colorado Department of Labor and Employment,
employment within the pot industry grew by double digits during the first
months of 2014, compared to the last quarter of 2013. Within the first six
months of 2014 the number of people licensed to work with marijuana plants in
some capacity or another also surged to nearly 12,000. To put that into
perspective, that is almost equal to the number of automotive technicians or
mechanics in Colorado. The annual demand for pot across Colorado is now more
130 metric tons, too, and many growers who farm this cash crop live in and
around the Denver area. They, in turn contribute to the economy by hiring and
spending.

Supporting Other Industries and Professions

Plus,
as reported by Bloomberg News, many marijuana entrepreneurs are sharing the
wealth by adding valuable jobs and rewarding employees with attractive benefits
and salary increases. The Bureau of Labor Statistics does not yet have data
compiled for 2014, so hard numbers related to the marijuana trade are difficult
to calculate.

But
NBC News reported that one security guard company that opened up in Denver last
year had landed dozens of contracts to guard pot dispensaries and was adding
about one new client per day – while charging fees of $5,000 to $15,000 per
month. Similarly, there are professionals
hired to work for marijuana businesses such as attorneys, bookkeepers and accountants,
advertising agencies, insurance companies, and even culinary professionals to
make a variety of edible marijuana concoctions.

The
banking industry does not yet participate in the marijuana trade because that
would be illegal due to federal laws controlling federally-regulated banks. But
a new marijuana industry credit union
has also been granted a state charter, and is awaiting approval from the
Federal Reserve. If that financial institution opens for business it will
immediately mean more jobs in Denver, and the credit union will likely open
multiple branches in the city as it expands its footprint throughout the state.

Increased Tourism

Across the state of Colorado, tourists or out-of-state visitors account for almost six percent of total marijuana sales. But in mountain resort communities 90 percent of recreational pot sales are to non-residents. But increased numbers of tourists coming to explore the pot culture also triggers across-the-board spending as those visitors purchase lodging, transportation, meals, and more. Denver opened its doors to more than 14 million visitors over the past year, for example, and the Mile High City broke a record for tourist revenue, bringing in more than $4 billion.

The
Denver Post’s publication Cannabist did, however, report on one cautionary tale
for tourists. Some of Denver’s leading hotels – which have strict nonsmoking
rules – have discovered that people sometimes buy pot locally and then retire
to their rooms to smoke it. That can lead to fines of as much as $200 tacked on
to their hotel bills, however, although these kinds of violations are the
exception, not the norm. After all, nearly half of all recreational marijuana
imbibed in Denver is the edible variety.

Causes for Concern to Health and Safety

Unfortunately,
edible marijuana has resulted in as much as a tenfold spike in the number of
people going to Denver area emergency rooms. The THC in legal marijuana is
often stronger and more potent than users expect, and those who take edible pot
often miscalculate how much THC is in the items they consume. A single
marijuana brownie, for instance, may contain enough pot to intoxicate several
people. But oftentimes people will eat edible cannabis and ingest much more THC
than they can handle.

As
a result, state regulators have rolled out some incentive programs that reward
those who make these edible products if they create items that have lower
levels of THC or are more compatible as single servings. The ways those
incentives work is that products containing more than 10 milligrams of THC are
subjected to greater regulatory oversight and stricter labeling standards.

One
area that was cause for concern was crime. Some predicted that legalization was
reduce crimes related to black market marijuana sales, but that roadways would
become more dangerous because of pot-impaired stoners behind the wheel.
Denver’s violent crime rates did noticeably decline, however, during the first
11 months of 2014, and the number of Colorado highway traffic fatalities also
fell.

Market Dynamics and Future Forecasts

A
member of the prestigious Brookings Institution in Washington, D.C. was cited
in the Denver Post recently, explaining how experiments like the one underway
in Denver will have an impact that forces the black market trade for marijuana
to make significant adjustments. While illicit trade will certainly continue
for the foreseeable future, legalization can be expected to shrink the volume
and profitability of the marijuana black market – which will also have a
similar impact on the crime syndicates that traffic in illegal pot.

The
Brookings Institution also noted in a report published last summer than legalization
of marijuana has had a measurable positive effect on the job market for young,
recent graduates. That’s at a time when the career outlook for many college
grads is dismal, and will likely influence more young, educated professionals
to move to Denver to participate in the retail or agricultural side of the
market.

Farming
pot around Denver can be a lucrative enterprise. While it can be difficult and
sometimes extraordinarily expensive to launch a retail marijuana shop, it is
possible to secure all the licenses and official credentials to grow weed by
investing around $10,000. A prolific grower can earn that back quickly, and
marijuana as a cash crop is a very attractive venture in and around Denver.
Later in 2015 the first big harvest will come in, and then it will be possible
to accurately quantify the overall economic impact – and the effect on pricing
from supply and demand – of locally-sourced marijuana.

Another
change that could impact the industry in Denver is that starting next year more
licenses to sell pot may be available from the city. But at least until January
of 2016, only those entities that were already operating medical marijuana
facilities like shops and cultivation facilities are eligible to apply for a
retail marijuana license. They can either convert their business to a
recreational retail enterprise or they can apply for a recreational shop
license in addition to running their existing medical marijuana dispensary.
Regardless of whether more licenses are made available to newcomers to the
industry, it is unlikely that this issue will have a significant impact on
overall Denver pot sales. The city will want to regulate the number of outlets
to keep it manageable.